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BELLEFONTE BOROUGH AUTHORITY v. GATEWAY EQUIPMENT & SUPPLY CO. (05/13/71)

decided: May 13, 1971.

BELLEFONTE BOROUGH AUTHORITY
v.
GATEWAY EQUIPMENT & SUPPLY CO., INC. ET AL., APPELLANTS



Appeal from judgment of Court of Common Pleas of Centre County, June T., 1969, No. 23, in case of Bellefonte Borough Authority v. Gateway Equipment & Supply Co., Inc., and Maryland Casualty Company.

COUNSEL

Anthony J. Martin, with him Donald D. Rossetti, and Martin, Finnegan and Rossetti, for appellants.

John W. Blasko, with him McQuade, Blasko, Brown and Geiser, for appellee.

Bell, C. J., Jones, Eagen, O'Brien, Roberts, Pomeroy and Barbieri, JJ. Opinion by Mr. Justice Jones.

Author: Jones

[ 442 Pa. Page 493]

This appeal presents two principal issues: (1) where a contractor, whose bid for work to be performed for a municipal authority is accepted and to whom the contract is awarded, refuses to enter into the contract on the ground that the amount of its bid was arrived at by an honest mistake which should have been obvious to the authority, are the contractor and its surety liable on the bond which accompanied the bid? (2) if they are liable, is the extent of their liability measured by the actual loss to the authority or the amount of the bond?

The Bellefonte Borough Authority (Authority) prepared plans and specifications for the construction of sanitary sewers and the resurfacing of streets in Bellefonte Borough. On the basis of these plans and specifications, the Authority invited contractors to submit written bids for the accomplishment of the work. Prospective bidders were instructed that each bid must be accompanied by either cash, a certified check or a bond

[ 442 Pa. Page 494]

    in an amount representing five (5%) per cent of the bid; if a bond was furnished, the surety was subject to approval by the Authority. Bidders were further instructed, in writing: "The successful bidder, upon his failure or refusal to execute and deliver the contract and bonds [performance, labor and materialmen] within ten days after he has received notice of the acceptance of his bid, shall forfeit to the [Authority], as liquidated damages for such failure or refusal, the security deposited with his bid." (Italics supplied).

Gateway Equipment & Supply Co., Inc. (Gateway), on August 5, 1968, submitted a bid for the work and attached to its bid a bond in the amount of $45,000 wherein Gateway was principal and Maryland Casualty Company (Maryland) was surety.*fn1 Inter alia, the bond provided that it was expressly "understood and agreed that the liability of the Surety for any and all claims [under the bond] shall, in no event, exceed the penal amount of [$45,000]." (Italics supplied).

When the bids were opened on August 5, 1968, Gateway's bid ($831,665.41) was the lowest bid, the next lowest being that of Gerl Construction Company (Gerl) ($1,220,554.34).

After the bids were opened, Gateway notified the Authority that it had made a mistake in the computation of its bid. On August 21, 1968, the Authority awarded the contract to Gateway at its bid price and notified Gateway of its intention to hold it responsible on its bid. Gateway refused to enter into the contract and was declared in default. The work was then readvertised for bids by the Authority, Gerl ...


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